NASD - Registered Attorneys Discover Added Service and Increased Revenues
[editor note NASD is now FINRA]
Massachusetts Lawyers Journal - March 4, 1996 Special Feature Financial
By: Bruce Fenton
It's a classic scenario: a client for whom you did estate work, a real estate
transaction, or another service comes to you and asks how they should invest
their assets. Often times the assets are from a retirement distribution, sale of
a home or business or an inheritance. Sometimes the client is faced with more
money than they have ever had.
Naturally, their attorney is viewed as a point person for investment advice. The
question is: with 20,000 money managers and over 6600 mutual funds in the US,
what investments do you recommend? Furthermore, how do you know what strategy to
One option is to refer the client to a broker, perhaps your own broker or a
client who is in the investment business. The problem here is twofold: many
brokers at major firms are tied to their own firm's proprietary investments.
Secondly, unless you know the individual on a close personal and professional
basis, how can you vouch for their credibility?
Most attorneys are pretty careful about how they recommend a client's life
savings be invested. Fortunately, these days there are many entities that can
assist individuals in learning about investments, attorneys can use these
resources to assist clients.
An attorney who keeps up with financial options enough to make quality
recommendations is providing a great service to clients. A few well-selected
periodicals and books and perhaps some use of the Internet or an on-line news
service will put an attorney on the right track for making quality
recommendations. It is not necessary that an attorney spend an enormous amount
of time analyzing investments to make quality recommendations.
Once attorneys have the knowledge to give quality advice, they still have the
problem of not being able to actually execute transactions for the clients
unless they are registered with the National Association of Securities Dealers
(NASD). Certainly an attorney can give investment advice incidental to their
practice but that puts an attorney back to square one in dealing with referring
the business to another professional. The good news is that it is fairly easy
for an attorney to become registered with the NASD as a registered
Before an attorney decides to become registered they should take a good look at
their practice and see how much need their clients have for investment advice.
Attorneys who specialize in estate planning, tax law, ERISA law, and those who
work with businesses and high net worth individuals will benefit most from
assisting clients with their investment needs.
Another good way for attorneys to judge the level of client need is to determine
how often they receive requests for assistance with investments. If a few
clients ask for advice each year then chances are many would need assistance if
the attorney made them aware that investment services are available.
My guess is that there are a huge number of people out there who need advice but
simply do not know where to turn for it. Many people will speak to friends and
relatives for advice. An even larger number of people will speak to a
professional whom they already trust when it comes to much needed investment
advice. This is the key benefit of attorneys becoming registered - they are
providing advice that is desperately needed and they are already known and
trusted by the clients.
TAKING THE PLUNGE:
Once an attorney decides to become registered, the first step is to be sponsored
by an investment firm. Attorneys should be careful when choosing a sponsoring
firm. The vast majority of investment firms do not allow attorneys to register
with them unless they abandon their legal practice and become full time
employees. Obviously this option has little appeal for the attorney with a
thriving legal practice. Once an attorney finds a firm who will sponsor them,
they should find out what additional support the firm will provide once the
attorney is registered. A license can be useless without assistance in making
recommendations to clients and how to actually carry out the transactions.
The attorney then takes the Series 7, a six hour NASD exam. Studying for the
Series 7 takes about 70 hours. Unlike the Bar Exam, the exams are given on a
regular basis at least a few times per week. The exam covers stocks, margin,
options, regulations, securities acts, and compliance with SEC and NASD
After the Series 7 is completed there is a minor state exam and a background
check that must be completed. The total cost for registration, exams, study
materials, the background check, and paperwork is usually about $1150.
Usually within a few days of completing the Series 7, the attorney is able to
conduct investment business. The registration of such an attorney is no
different from that of a broker at a national full service firm. The main
difference is that registered attorneys work out of their own office and are not
tied to any proprietary company.
REAPING THE BENEFITS:
Once registered, attorneys can conduct business in the same way as a broker
without having to refer the business to someone else. Also attorneys are
compensated at the same rate that full time investment professionals are. An
individual attorney can develop a second income stream and a firm with several
attorneys can see a very substantial increase in revenue.
Unlike a starting broker at a Wall Street firm, registered attorneys and firms
do not need to cold call and aggressively market to build a practice from
scratch. Attorneys have enormous amount of potential investment revenue right
under their noses-- clients and contacts.
Although many brokers from the largest investment firms make a good living,
hardly any enter the business with the audience of hundreds or even thousands of
contacts that lawyers and law firms have. A registered attorney with a
well-developed client base can increase revenue in an amount equal to the salary
of a broker without having to spend nearly as much time finding new accounts.
Attorneys might ask themselves `Why let someone else make a living off my
Even more important than the increased revenue is the fact that registered
attorneys can offer a service that their clients truly need. Registered
attorneys have a competitive advantage over other attorneys. This can lead to an
increase in referrals and also may open doors to large estates and pension
They also have an advantage over the entities that currently handle most of
their client's assets. The assets of most clients are held by four major
entities: banks, full service brokerage firms, discount firms, and mutual fund
companies. A registered attorney is often able to offer better service than
these entities because:
They are not tied to any one company's proprietary investment products.
They are able to remain completely objective in recommending investments.
They have no incentive to recommend any one investment over another other than
its merit, and...
They have an advantage because of the additional legal expertise they can offer.
Once clients are made aware of their registered attorney's abilities there seems
to be little reason for them to have their investments handled elsewhere. One
might wonder why a client would call an eight-hundred number to make an
investment when they can receive high quality objective advice and service from
their own attorney at no extra cost.
Areas in which registered attorneys can add particular value are in assisting
companies and non profit organizations in the management of their pensions,
endowments and other funds. Organizations with large pools of money such as
these will often use the services of an outside money manager such as Goldman
Sachs, State Street Bank or Lazard Frres.
In this type of situation the registered attorney can act as a liaison between
the money management firm and the client. Because the attorney is handling the
immediate client service needs, the money management firm will discount their
fee to the client. The registered attorney takes this discounted portion as
The added benefit to the client is not only the added service their attorney can
provide but that they now have an objective buffer between them and the money
manager. This is particularly useful in fiduciary accounts especially because
the client incurs no added expense.
Becoming registered is not without drawbacks. In order to make the registration
process worthwhile, attorneys must present the service to their clients. The
best ways to do this is through seminars and financial planning sessions.
Inviting clients to an objective, non-sales oriented seminar is an excellent way
to present the service. Another great way is for attorneys to invite clients
into their office for a financial review and make appropriate recommendations.
Incidentally, the time an attorney spends giving investment advice should not be
billed. Attorneys also must make clients aware that they are receiving a fee or
commission for the investments they recommend.
If an objective, informational, non-sales oriented marketing and client contact
plan is implemented the potential is extraordinary. On the other hand, if an
attorney does not make clients aware of their abilities they will have wasted
their time and money on the registration process.
While an individual attorney with a well-developed client base can increase
their income by as much as $500,000 or more, there is a point when additional
support will be required. Attorneys who aggressively integrate investments into
their service can eventually reach a level where the additional workload
requires hiring a support person. The good news is that by the time registered
attorneys reach this level they are generating enough revenue to make hiring an
additional person worthwhile.
Attorneys who aim at a substantial increase in revenue should keep in mind that
their revenue is directly related to the assets they manage. There is certainly
work involved in getting assets under management. The development of an
attorney's client and contact base is very important to the amount of work
involved in opening investment accounts. Remember: A registration is only as
good as the effort put into effectively integrating it into a practice; however,
becoming registered is an exciting way for attorneys and law firms to increase
their revenue and offer a valuable service to their clients.
Atlantic Financial helps attorneys become NASD registered and offer investment
services to clients. E-mail: Inquiries welcomed.
Copyright 1996 Bruce Fenton
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